What Is The Stakeholder Theory Of Agency Theory

Corporate governance is a set of actions used to handle the relationship between stakeholders by determining and controlling the strategic direction and performance of the organization. Corporate governance major concern is making sure that the strategic decisions are effective and that it paves the way towards strategic competitiveness. (Hitt, Ireland, Hoskisson, 2017, p. 310). In today’s corporation, the primary objective of corporate governance is to align top-level manager’s and stakeholders interest. That is why corporate governance is involved when there is a conflict of interest between with the owners, managers, and members of the board of directors (Hitt, Ireland, Hoskisson, 2017, p. 310-311).

The stakeholder theory made popular by Ed Freeman (1984) does seem to represent a major advance over the classical view (Freeman, 1984). It might seem inappropriate to refer to the stakeholder position as neoclassical. Bowie (1991: 56-66) has defined stakeholders as a group whose existence was necessary for the survival of the firm--stockholders, employees, customers, suppliers, the local community, and managers themselves.

Managers and shareholders are the utmost contributors of these conflicts, hence affecting the entire structural organization of a company, its managerial system and eventually to the company's societal responsibility. A corporation is well organized with stipulated division of responsibilities among the arms of the organizational structure, shareholders, directors, managers and corporate officers. However, conflicts between managers in most firms and shareholders have brought about agency problems. Shares and their trade have seen many companies rise to big investments. Shareholders keep the companies running

The purpose of this paper is to recognize the definition and what a stakeholder is and what it does. I will also explain the two groups of the stakeholders and put the stakeholders in the group where they belong. I will explain what the stakeholders responsibilities are, what their ethical responsibilities to the company. Will explain what would be the appropriate response to the situation in the company. And finally explain what Joe should propose to the management team and how Joe should support his proposal.

In my review of A Primer on Corporate Governance by Cornelis A. de Kluyver I intend to examine, evaluate, and break down his key points. The book provides a general view on how corporations govern themselves, and the internal and external forces that effect and constrain them. The biggest external force is of course the US Government and the variety of laws and regulations imposed upon corporations. Internally, they are managed by the CEO and board of directors along with a set group of committees and corporate guidelines.

Daft (2012) defines stakeholders as “any group within or outside the organization that has a stake in the organizations performance.” Stakeholders within the organization include the owners, managers and employees while external stakeholders includes the organizations customers, suppliers, community, workers unions, creditors as well as the government. Due the variety as well as different nature of the stakeholders, each stakeholder has a different expectation from the organization as concerns their stake. It is from this characteristic and expectation that each stakeholder will be affected differently by actions and decisions as well as policies and practices implemented by the business from those of another stakeholder (Carroll & Buchholtz, 2014). This also means that the different stakeholders will act or make decisions that affect the business in a way best situated for them. Carroll & Buchholtz (2014) discuss the relationship between the business and stakeholders as one that has a two-way interaction; businesses will affect stakeholders as well as stakeholders affect the business, that is an interchange of influence. The complexity of the stakeholder-business relationship calls for

In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else’s best interests, rather than those of the shareholders. If such events

In general ,the stakeholder approach may be more conducive to balancing a wide variety of corporate interests and thereby discouraging impropriety.Executives and boards should take the perceptions of both shareholders and stakeholders into account when formulating strategy and enunciate their stance in all organizational communications. Only within that kind of clearly delineated context, can managers be expected to make appropriate decisions. Indeed, some of the most successful businesses are those which have embraced stakeholder values for example Bodyshop. However, we see that generally, shareholder value

According to the Organization for Economic Cooperation and Development (OECD), corporate stakeholders have a very important role, not only within the business for the community as well. "Good corporate governance helps...to ensure that corporations take into account the interests of a wide range of constituencies, as well as the communities within which they operate, and that their boards are accountable to the company and the shareholders. This, in turn, helps to assure that corporations operate for the benefit of society as a whole" (1999).

The relationship among the many stakeholders and the way an organization is directed and governed is therefore created. Stakeholders might include customers, employees, creditors, suppliers and distributors, the community and the owners at large. The principle stakeholders are the board of directors, managements and employees. The first model of government and non-profit implementation often involves three groups: - executive board, supervisory board, and advisory board whose are appointed by shareholders to run the organization except the last group are bought in as independent experts to assist the company. Hence, what are good practices of corporate governance? How to ensure the directors act in the interests of the public?

This paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that “neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large”. On the other hand, the theory of stakeholder suggests that the managers of an organisation do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees,

Stakeholders are people or groups with interest in an organization that can affect or be affected by the organization itself, its objectives, or its policies (BusinessDictionary, 2015). Each stakeholder brings their own perspective to the table based on their relationship with the organization (e.g. internal or external role), their level of experience, and their area of expertise about the subject matter they are involved with. At a high level, the list of stakeholders for any organization could include people or groups such as: customers, employees, government agencies, suppliers, unions, community resources, shareholders, and business owners. For the purpose of this assignment, I will discuss and review stakeholders relative to the

The shareholder theory states that companies' objectives are represented by maximizing profits for shareholders, while not valuing the interests of stakeholders. The stakeholder theory states that companies' activity must be oriented towards producing benefits for categories of stakeholders like employees, customers, managers, investors, governments, the society, and others. The different views on companies' objectives reflect the complexity of the issue.

The (word) stakeholder means any person with an interest in business, someone who can contribute to the company grows and success or who benefits from its success. The various stakeholders in business have differing role and their level of involvement in the enterprise varies

As explained by Schelker (2013), the agency problem between the owners and the management of a firm is at the heart of the corporate governance literature. Hence, there is a need for a